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How the Market Works

Macroeconomics: Bears Don’t Moo

Posted by kdadmin on June 22nd, 2015.

Macroeconomics: Bears Don’t Moo

Last Wednesday, the Federal Reserve release said that there was no change in their monetary policy. But then the conspiracy theorists took hold, decided there was some hidden agenda, got all bullish, and started buying stocks.

They moo’d themselves, and the S&P500 (blue line), up 1.5% in one single day.

Then they promptly got gored as the market lost it all the next day.

Notice that they finished the week below the core bond market (orange line)?

Does this pattern sound familiar? It should. It happened on March 27th. See my post: Sucker Punch.

You can expect more of this nonsense as we get closer to the date that the Feds are expected to raise interest rates. Everybody and their brother has an opinion about what’s going to happen and when. Never mind that they the vast majority of these people don’t have access to true economic research, which targets September as the likely date.

Smart money waits this out, looks for opportunity, and prepares for bloodshed. Just imagine what will happen if interest rates go up more than the market expects. All those investing sheep who planned to “wait it out” instead of getting out of the way, will likely be in total pandemonium.

That’s when the wolves come out. When those investors, who sat on the sidelines, in cash or short term bonds, will see opportunity, and have the resources to join in the feast. This is how the market works.

Be a wolf. Not a sheep.

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